Capital Budgeting5

Capital Budgeting5 - 1 2 3 4 5 $300 $400 $450 $300 $200 At...

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Old Exam Questions - Capital Budgeting Page 29 of 55 Pages 1 $300 2 $400 3 $450 4 $300 5 $200 At the project’s WACC of 12 percent, the project has an NPV of $346.18. Given this information, determine the project’s internal rate of return. A. 25.17% B. 26.92% C. 24.23% D. 27.88% E. 26.01% 42. A company is considering a project with the following cash flows: Project Year Cash Flow 0 -$200,000 1 $125,000 2 $100,000 3 $75,000 4 -$25,000 The project’s weighted average cost of capital is estimated to be 10 percent. Given this information, determine the project’s modified internal rate of return (MIRR). A. 14.65% B. 14.25% C. 14.05% D. 14.85% E. 14.45% YOU ARE GIVEN THE FOLLOWING INFORMATION FOR PROBLEMS 43 - 44: Year Project A Cash Flow Project B Cash Flow 0 - $10,000.00 - $11,000.00 1 $ 3,000.00 $ 5,000.00 2 $ 4,000.00 $ 4,000.00 3 $ 5,000.00 $ 4,000.00 4 $ 3,000.00 $ 3,000.00
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Old Exam Questions - Capital Budgeting Page 30 of 55 Pages 43. Given this information, and assuming that the relevant cost of capital for both projects is 10%, determine the net present value (NPV) for the project with the highest internal rate of return (IRR). A. $1,888.37 B. $1,854.03 C. $1,905.54 D. $1,836.86 E. $1,871.20 44. Assume now that the firm has capital rationing, but knows that its true reinvestment rate is 20%, while its cost of capital is 10 percent. Given this information, determine the modified net present value (MNPV) for Project B. A. $4,197.24 B. $4,145.73 C. $4,214.41 D. $4,180.07 E. $4,162.90 YOU ARE GIVEN THE FOLLOWING INFORMATION FOR PROBLEMS 45-47: Year Project A Cash Flow Project B Cash Flow 0 - $10,000.00 - $12,000.00 1 $ 3,000.00 $ 3,000.00 2 $ 2,000.00 $ 4,000.00 3 $ 5,000.00 $ 5,000.00 4 $ 2,000.00 $ 4,000.00 5 $ 2,000.00 $ 1,000.00 Risk-free Rate 6.0% Market Risk Premium 4.0% Project A Beta 1.50 Project B Beta 1.40 45. Given this information, determine the internal; rate of return (IRR) for Project A. A. 13.36% B. 12.62% C. 13.73% D. 12.25% E. 12.99% 46. Given this information, determine the modified internal rate of return for Project B. A. 12.42% B. 11.68%
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Old Exam Questions - Capital Budgeting Page 31 of 55 Pages C. 12.79% D. 11.31% E. 12.05% 47. Given this information, determine the point (discount rate) at which the net present profiles for Projects A and B cross. A.
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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Capital Budgeting5 - 1 2 3 4 5 $300 $400 $450 $300 $200 At...

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